Looking for a loan shark? Take a look at our useful guide first…

The best advice for dealing with loan sharks is ‘don’t’. They’re unlicensed moneylenders who charge very high interest rates and sometimes use threats and violence to frighten people who can’t pay back their loan.

What is a loan shark?

A loan shark is an unlicensed moneylender. Licensed moneylenders are regulated by the Office of Fair Trading (OFT) and must follow the OFT’s codes of practice.

Because they’re not licensed, loan sharks operate outside the law. If you borrow from them it’s likely you’ll:

  • get a loan on very bad terms
  • pay an extortionate rate of interest
  • be harassed if you get behind with your repayments
  • be pressured into borrowing more from them to repay one debt with another

How to find out if a lender is licensed

The Consumer Credit Public Register lists everyone with an OFT licence as well as everyone who has applied for one or has had one taken away or suspended. It’s free to get basic information from the register, including trading names and the activities for which a business is licensed.

To search the public register, telephone 020 7211 8608 between 9.30am and 4pm Monday to Friday.

If a lender isn’t listed as having a current licence, don’t borrow money from them.

What to do if you have borrowed from a loan shark

If you have borrowed money from a loan shark you are under no legal obligation to repay the debt. You should contact your local Trading Standards office immediately. They will help you deal with your situation and the loan shark.
Is it a crime not to repay a loan from a loan shark?

If a lender isn’t licensed by the OFT then they have no legal right to recover the debt.

Loan sharks sometimes frighten people by saying they’ll be prosecuted and even sent to prison if they don’t pay up. This can’t happen - not repaying a loan from an unlicensed lender isn’t a criminal offence.

What to do if you’re being harassed

Any lender - licensed or unlicensed - who harasses you is breaking the law. You should report any loan shark to your local Trading Standards office, and to the police if the loan shark threatens you or uses violence.

Other ways of borrowing money

If you need a loan, always go to a licensed lender. There are reputable lenders who’ll consider lending to you even if your income’s low, your credit rating’s poor or you only need a small amount for a short while. You may still have to pay a high rate of interest but the Consumer Credit Act will cover your loan agreement. Always shop around for credit though - just because a lender is licensed it doesn’t necessarily mean you are getting a good deal.

If you’re on a low income and you need to borrow a small amount for a short time, look into borrowing from a credit union. Credit unions encourage you to save what you can and only borrow what you can afford to pay back. The most you’ll pay in interest is one per cent a month, so interest on a £100 loan won’t be more than £1 a month.

Source: DirectGov. Crown copyright.